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Israeli Defense Minister Moshe Ya'alon on Sunday said that while his government hopes to reach a final status peace agreement with the Palestinian Authority, if such an outcome remains unachievable, Israel "will manage."

Ya'alon's remarks were seen as a direct response to US Secretary of State John Kerry's address to the Munich Security a day earlier, in which the American diplomat insisted Israel would be in deep trouble if the current peace talks failed.

Ya'alon took exception to Kerry's underlying premise that the presence of Jews in Judea and Samaria (the so-called "West Bank") was the crux of the conflict.

"Settlements are not the obstacle to peace," he told the same conference. "The settlements include today less than five percent of the territory in the Palestinian arena."

Ya'alon pointed to the Palestinian leadership's refusal to allow Israeli Jews to remain in a future Palestinian state as evidence of its true intentions. "We have Arabs living side by side with us in Galilee and Jaffa and Acre - we don't deny this right. Why does the Palestinian leadership insist on getting the territory without Jews?" he wondered.

When pressed on whether or not his government was prepared to uproot Jewish settlements, Ya'alon said that he does not "sanctify" any piece of land, but was adamant that the more important question was whether or not the Palestinian leadership would ever recognize "our right to exist as a nation-state of the Jewish people, give up the right of return (of Palestinian refugees), and address our security needs."

And, while Ya'alon hopes all this will happen, "if not, we will manage."

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